UNIVERSITY OF CALIFORNIA - COOPERATIVE EXTENSION SAMPLE COSTS TO ESTABLISH AN OLIVE ORCHARD AND PRODUCE ~OLIVES~

1997 UNIVERSITY OF CALIFORNIA - COOPERATIVE EXTENSION SAMPLE COSTS TO ESTABLISH AN OLIVE ORCHARD AND PRODUCE ~OLIVES~ GLENN AND TEHAMA COUNTIES MANZANILLO VARIETY - FLOOD IRRIGATED Prepared by: Karen Klonsky Bill Krueger Pete Livingston U.C. Cooperative Extension Economist, Department of Agricultural and Resource Economics, U.C. Davis U.C. Cooperative Extension Farm Advisor, Glenn County U.C. Cooperative Extension Staff Research Associate, Department of Agricultural and Resource Economics, U.C. Davis

UNIVERSITY OF CALIFORNIA - COOPERATIVE EXTENSION SAMPLE COSTS FOR ESTABLISHING A MANZANILLO OLIVE ORCHARD AND PRODUCING OLIVES Glenn and Tehama Counties - 1997 INTRODUCTION Detailed costs of establishing a Manzanillo olive orchard and production of Manzanillo olives in Glenn and Tehama Counties are presented in this study. The hypothetical farm used in this report is 40 acres, 35 of which are in olive production. This study consists of General Assumptions for Establishing a Manzanillo Olive Orchard and Producing Manzanillo Olives and seven tables. It is intended as a guide only. It can be used to make production decisions, determine potential returns, prepare budgets, and evaluate production loans. Sample costs given for labor, materials, equipment and contract services are based on current figures. Some costs and practices detailed in this study may not be applicable to every situation. A blank, Your Cost, column is provided to enter your actual costs on Table 2, Sample Costs To Produce Manzanillo Olives and Table 3, Costs And Returns Per Acre to Produce Manzanillo Olives. Tables included: Table 1. Table 2. Table 3. Table 4. Table 5. Table 6. Table 7. Costs Per Acre to Establish A Manzanillo Olive Orchard Costs Per Acre to Produce Manzanillo Olives Costs and Returns Per Acre to Produce Manzanillo Olives Monthly Cash Costs Per Acre to Produce Manzanillo Olives Whole Farm Annual Equipment, Investment and Business Overhead Hourly Equipment Costs Ranging Analysis This and other studies can be obtained through the Department of Agricultural Economics, UC Davis (530 752-1515), or from selected county Cooperative Extension offices. For an explanation of calculations or assumptions used in this study refer to the attached General Assumptions or call the Department of Agricultural Economics, Cooperative Extension, University of California, Davis, California, (530) 752-3589 or the farm advisor in the county of interest. The University of California is an affirmative action/equal opportunity employer The University of California and the United States Department of Agriculture cooperating. 1997 Glenn/Tehema Olives Cost and Return Study UC Cooperative Extension 2

UNIVERSITY OF CALIFORNIA COOPERATIVE EXTENSION SAMPLE COSTS FOR ESTABLISHING A MANZANILLO OLIVE ORCHARD AND PRODUCING OLIVES Glenn and Tehama Counties - 1997 ASSUMPTIONS The following are assumptions for sample costs of establishing a Manzanillo olive orchard and producing olives in Glenn and Tehama Counties. Practices described are not recommendations by the University of California, but represent production procedures and materials considered typical of a well managed orchard for Glenn and Tehama Counties. Some costs, practices, and materials may not be applicable to your situation nor used during every year. Additional ones not indicated may be needed. Establishment and cultural practices vary by grower and region; variations can be significant. These costs are on an annual, per acre basis. The use of trade names in this report does not constitute an endorsement or recommendation by the University of California nor is any criticism implied by omission of other similar products. Land. The farm consists of 40 acres of land. Thirty five acres are planted to olives and five acres include roads, irrigation systems and farmstead. The orchard is farmed by the owner; additional management costs, ranging from $60 to $100 per acre, occur if practices are contracted. Property costs $3,000 per acre. Because only 35 of the 40 acres is planted with olives, land is valued at $3,429 per producing acre. Land is not depreciated. Trees. While Sevillano is the olive cultivar that historically and currently makes up the majority of the acreage in Glenn and Tehama Counties, in this study, the orchard is established with Manzanillo to reflect the current trend. A few of the cultivars representing the remainder of the olive acreage in this area that might also be planted include Sevillano, Ascolano, or Mission. Establishment and production costs should not vary significantly between varieties with the exception of chemical thinning costs which are not applicable to Sevillano. The trees are planted at 22' X 22' spacing, 90 trees per acre. Olive trees have a long production life if they are well maintained. The life of the orchard at the time of planting in this study is estimated to be 40 years. Irrigation System. The irrigation system consists of a well, pump, and low pressure mainline with valves to flood the water into the orchard. It is completed before the trees are planted. For the first four years water is confined by ridges to a small area, 6-8 feet wide, underneath the trees. From the fifth year on water is delivered to the orchard by flooding down the middle of tree rows with the rows acting as borders for irrigation purposes. Since the orchard was planted on agricultural land it is assumed that a pump and well already exist and the cost of the irrigation system is for the recasing of the well, refurbishment of the pump and motor in addition to the installation of a new underground mainlines and field valves. The new irrigation system is installed after the orchard has been laid out and prior to planting. It is considered an improvement to the property; the cost is shown in the investments section of Table 4. The well, pump, and mainlines have an expected useful life of 40 years. 1997 Glenn/Tehema Olives Cost and Return Study UC Cooperative Extension 3

Water Cost. Pumped water (plus labor) is the irrigation cost. Water cost for irrigation is determined by the amount of pumped water using local electrical rates. The cost is based on using a 20-25 hp motor to pump 48 acre-inches 75 feet in a 100 foot well over 35 acres. Price per acre foot for water will vary from grower to grower in this region depending on the particular fuel cost, various well characteristics, and other irrigation factors. In this study, water is calculated to cost $14.28 per acre foot. Irrigation rates increase each year as the orchard matures. No assumption is made about effective rainfall. The amount of water applied to the orchard during the establishment period varies each year and is shown in Table A. Table A. Applied Irrigation Water Year Acre Feet/Year 1 0.5 2 1.0 3 1.5 4 2.0 5+ 4.0 ESTABLISHMENT CULTURAL PRACTICES Site Preparation. This orchard is established on ground that has been previously leveled for flood irrigated crops planted previously. The land is assumed to be well drained and either a class I or II soil. Land preparation begins with deep ripping the soil profile to 2 to 4 feet in order to break up any underlying hardpan which would affect root and water penetration and is followed by touch-up leveling. Leveling is important since the orchard utilizes a flood irrigation system. Ripping and leveling are performed by contract operators. The ground is disced and landplaned several times to break up large clods of soil and smooth the soil in advance of planting the trees. All operations that prepare the orchard for planting are done in the year prior to planting. However, for this study, these costs are included with those incurred in the first year as shown in Table 1. Planting. Planting the orchard begins with marking tree sites with a small stake. Then holes are dug and trees planted. Later trunks are wrapped with white, water-resistant guards so trees are protected from sunburn and herbicides. A 6 foot, 2 X 2 stake is driven onto the ground next to the tree and the young tree is tied to it. Regular pruning, other than sucker removal, begins in the fourth year and hours required to perform this task, as well as costs, increase annually. Pruning is performed in spring months. In the second year, one tree per acre will have to be replanted. Fertilization. Nitrogen is the major nutrient required for proper tree growth and optimum yields. Nitrogen fertilizer is applied in a granular form, urea (46% nitrogen), at increasing rates during orchard establishment. Urea is spread by hand through the first three years, then is applied by a mechanical spreader and tractor. Annual rates of N are shown in Table B. Table B. Applied nitrogen for olives in Glenn and Tehama Counties Year Pounds of N/Tree Pounds Of N/Acre Pounds of Urea/Acre 1 0 0 0 2 0.2 18 39 3 0.5 45 98 4 0.7 63 137 5 1.1 99 215 6 1.3 117 254 7+ 1.5 135 293 1997 Glenn/Tehema Olives Cost and Return Study UC Cooperative Extension 4

Orchard Floor Management. Control of weeds is important in young orchards so that trees are not stressed due competition for water and nutrients by weeds. Management of the orchard floor uses several techniques to control weeds; application of herbicides and mowing. Chemical weed control in the orchard begins in spring of the first year with a foliar-applied herbicide applied as a spot spray four times along an eight foot strip in the tree rows. In the winter prior the second year a residual herbicide mix is sprayed down the tree row. From the second year on, the summer treatment consists of one spray down the tree row. The winter residual spray changes to a combination of herbicides and is sprayed along the tree row. By the third year the winter residual spray is a single herbicide application down the tree row. During the first three years because no water is applied to the middles, it is only necessary to mow the row middles three times. From the fourth year when water is applied to the whole orchard floor, it is necessary to mow seven times. Disease Management. During the developmental years, pest and disease controls are minimal. Peacock spot and olive knot are major diseases, causing defoliation and shoot death. These infect leaves and shoots. In this study, copper is used to prevent peacock spot and olive knot. It is applied annually beginning in the fall of the first year. Insect Management. There are usually no insect problems that need control during the period of orchard establishment. Occasional control may be needed for black scale, but it usually can be controlled by pruning to open up canopies and increase heat mortality of the insect. Establishment Cost. The cost to establish the orchard is used to determine non-cash overhead expenses, depreciation, and interest on investment for production years. The establishment cost is the sum of cash costs for land preparation, planting, trees, production expenses, and cash overhead for growing olive trees from planting until the end of the first year fruit is harvested. The Accumulated Net Cash Cost/Acre in the third year shown in Table 1, represents the establishment cost per acre. For this study, this cost is $3,020 per acre or $105,700 for the 35 acre orchard. Establishment cost is depreciated beginning in the fourth year over the remaining 37 of the 40 years that the orchard is assumed to be in production. PRODUCTION CULTURAL PRACTICES Pruning. Pruning strategy is critical to production. It is dependent on several factors such as olive cultivar and planting density. In this study, pruning is done in the spring by hand every other year. Since pruning is performed on a bi-annual basis half of the cost incurred in the pruning year is shown in Tables 2 and 3. Prunings are shredded in the row middles. Fertilization. Mature tree nutrition is determined by leaf analysis in July. Nitrogen is sidedressed to the tree rows at a rate of 1.5 pound of N per tree annually. Fertilizer is in dry, granular form (urea = 46% nitrogen) and applied in January or February. 1997 Glenn/Tehema Olives Cost and Return Study UC Cooperative Extension 5

Orchard Floor Management. Weeds in the tree rows (an eight foot strip) are controlled with herbicides. In mature orchards residual herbicides are applied in the fall. Different herbicides are applied alternately each year to maintain effective weed control. Perennial weeds in the tree row receive one spot spray of a foliarly-applied herbicide each year. Vegetation in the row middles is mowed seven times during the growing season. Insect Management. Black scale, an insect pest, requires occasional insecticide treatment. For trees that are pruned adequately and not allowed to become dense, chemical control is seldom necessary. Only following cool years or in those orchards that have become too dense would insecticide treatment be required to reduce the population to manageable levels. This study does not include any treatment for black scale. Disease Management. The fungal disease, peacock spot and the bacterial disease, olive knot damage leaves, shoots, and branches. Their prevention requires an annual spray of copper following harvest and prior to Fall rains. Thinning. Fruit thinning is needed once olives begin setting fruit in large quantities. Thinning improves fruit size, quality, uniformity, and promotes regular bearing each year. It is accomplished with the use of naphthaleneacetic acid (NAA). Application timing is critical to achieve the best results. Chemical thinning is usually performed 2 to 2 1/2 weeks after full bloom. NAA is applied in May or early June and begins in the fifth season. Pesticide Recommendations. Inputs cited in this report are not recommendations. For specific pesticides choices and rates consult the UC IPM Olive Pest Management Guidelines. Written recommendations are required for many pesticides and are made by licensed pest control advisors. For information and pesticide use permits, contact the local county Agricultural Commissioner's office. Harvest. Harvest starts in the third year after the orchard is planted. Olives are hand harvested and in this study, the crop is harvested by a contractor. All costs for contracted harvest operations are on a tonnage basis. A charge of $225 per ton is used. Yield maturity is reached in the eighth year. Assessments. Under a federal marketing order, mandatory assessment fees are collected by the California Olive Committee (COC). These assessments are charged to the processor to pay for olive marketing order administration, research, and market development. Growers do not pay the assessment. Yields. As noted in the previous section, Manzanillo olives begin bearing an economic crop in the third year after planting. Typical annual yields for olives are measured in tons per acre and are shown in Table C. These yields are from the third year of orchard establishment to maturity. Table C. Annual Yield Per Acre Year Tons Per Acre 3 0.25 4 1.00 5 1.50 6 2.00 7 3.00 8+ 4.00 1997 Glenn/Tehema Olives Cost and Return Study UC Cooperative Extension 6

Returns. An estimated price of a $600 per ton of Manzanillo olives is used in this study so that a ranging analysis for different yields and price can be calculated. Returns, shown in Table 6, will vary and the yields and prices used in this study are an estimate taking into consideration current conditions. Risk. The risks associated with producing and marketing olives should not be minimized. While this study makes every effort to model a production system based on typical, real world practices, it cannot fully represent financial, agronomic and market risks which affect the profitability and economic viability of olive production. Risk is caused by various sources of uncertainty which include production, price, and financial. Examples of these are insect damage, a decrease in price, or an increase in interest rates. Due to the risk involved, access to a market is crucial. A market channel should be determined before olive orchards are planted and brought into production. Labor. Hourly wages for workers are $7.15, and $5.15 per hour for skilled, and field workers respectively. Adding 34% for Workers Compensation, Social Security, Medicare insurance, and other possible benefits gives the labor rates shown of $9.58 per hour for skilled labor, and $6.90 per hour for field labor. Labor for operations involving machinery are 20% higher than the operation time given in Table 1 to account for the extra labor involved in equipment set up, moving, maintenance, work breaks, and repair. Wages for management are not included as a cash overhead cost. The orchard is farmed by the owner; additional management costs ranging from $60 to $100 per acre, occur if practices are contracted. Any return above total costs is considered a return to management and risk. Cash Overhead. Cash overhead consists of various cash expenses paid out during the year that are assigned to the whole farm and not to a particular operation. These costs include property taxes, interest on operating capital, office expense, liability and property insurance, sanitation services, and equipment repairs. Property Taxes. Counties charge a base property tax rate of 1% on the assessed value of the property. In some counties special assessment districts exist and charge additional taxes on property including equipment, buildings, and improvements. For this study, county taxes are calculated as 1% of the average value of the property. Average value equals (new cost plus salvage value) divided by 2 on a per acre basis. Salvage value for investments will vary. Interest On Operating Capital. Interest on operating capital is based on cash operating costs and is calculated monthly until harvest at a nominal rate of 10.00% per year. A nominal interest rate is the going market cost of borrowed funds. Office Expense. Office and business expenses are estimated at $106 per acre. These expenses include office supplies, telephones, bookkeeping, accounting, legal fees, road maintenance, etc. Cash overhead costs are found in Tables 1-4. Insurance. Insurance for farm investments vary depending on the assets included and the amount of coverage. Property insurance provides coverage for property loss and is charged at 0.713% of the average value of the assets over their useful life. Liability insurance covers accidents on the farm and costs $469 for the entire farm. 1997 Glenn/Tehema Olives Cost and Return Study UC Cooperative Extension 7

Sanitation Services Sanitation services provide portable toilets for the orchard and cost the farm $122 annually. This cost includes delivery and servicing of toilets. Cash overhead costs are included in Tables 1-5. Non-Cash Overhead. Non-cash overhead is calculated as the capital recovery cost for equipment and other farm investments. Although farm equipment on olives orchards in the Southern San Joaquin Valley might be purchased new or used, this study shows the current purchase price for new equipment. The new purchase price is adjusted to 60% to indicate a mix of new and used equipment. Annual ownership costs (Equipment and Investments) are shown in Tables 1-3, and 5. They represent the capital recovery cost for investments on an annual per acre basis. Capital Recovery Costs. Capital recovery cost is the annual depreciation and interest costs for a capital investment. It is the amount of money required each year to recover the difference between the purchase price and salvage value (unrecovered capital). Put another way, it is equivalent to the annual payment on a loan for the investment with the downpayment equal to the discounted salvage value. This is a more complex method of calculating ownership costs than straight-line depreciation and opportunity costs, but more accurately represents the annual costs of ownership because it takes the time value of money into account. The calculation for the annual capital recovery costs is taken from the publication Farm Management (Boehlje and Eidman) and is as follows. Purchase Salvage Pr ice Value Capital Recovery Factor + Salvage Interest Value Rate Salvage Value. Salvage value is an estimate of the remaining value of an investment at the end of its life. For farm machinery (e.g., tractors and implements) the remaining value is a percentage of the new cost of the investment (Boehlje and Eidman). The life in years is estimated by dividing the wear-out life, as given by the ASAE by the annual use in hours. Salvage value is calculated as: New Price % Remaining Value Salvage value for other investments including irrigation systems, buildings, and miscellaneous equipment is zero. The salvage value for land is equal to the purchase price because land does not depreciate from use. The purchase price and salvage value for certain equipment and investments are shown in Table 5. Capital Recovery Factor. Capital recovery factor is the amortization factor or annual payment whose present value at compound interest is 1. It is the function of the interest rate and years of life of the equipment. Interest Rate. The interest rate of 8.25% used to calculate capital recovery cost is the USDA-ERS s ten year average of California s agricultural sector longrun rate of return to production assets from current income. It is used to reflect the long-term realized rate of return to these specialized resources that can only be used effectively in the agricultural sector. In other words, the next best alternative use for these resources is in another agricultural enterprise. Equipment Cash Costs. Equipment costs are composed of three parts; non-cash overhead, cash overhead, and operating costs. Both of the overhead factors have been discussed in previous sections. The operating costs consist of fuel, lubrication, and repairs. 1997 Glenn/Tehema Olives Cost and Return Study UC Cooperative Extension 8

In allocating equipment costs on a per acre basis, the following hourly charges are calculated first and shown in Table 6. Repair costs are based on purchase price, annual hours of use, total hours of life, and repair coefficients formulated by the American Society of Agricultural Engineers (ASAE). Fuel and lubrication costs are also determined by ASAE equations based on maximum PTO hp, and type of fuel used. The fuel and repair cost per acre for each operation in Table 2 is determined by multiplying the total hourly operating cost in Table 6 for each piece of equipment used for the cultural practice by the number of hours per acre for that operation. Tractor time is 10% higher than implement time (Operation Time) for a given operation to account for fueling, moving equipment, and setup time. Prices for on-farm delivery of diesel and gasoline are $0.97 and $1.30 per gallon, respectively. Acknowledgment. Appreciation is expressed to those growers and other cooperators who provided support for this study. REFERENCES American Society of Agricultural Engineers. (ASAE). 1994. American Society of Agricultural Engineers Standards Yearbook. St. Joseph, Missouri. Boelje, Michael D., and Vernon R. Eidman. 1984. Farm Management. John Wiley and Sons. New York, New York Statewide IPM Project. 1990. UC Pest Management Guidelines, Olives. In M. L. Flint (ed.) UC IPM pest management guidelines. Pub. 3339. IPM Education and Publication. University of California, Division of Agriculture and Natural Resources. Oakland, CA. University of California. 1994. Olive Production Manual. Pub. 3353. University of California, Division of Agriculture and Natural Resources. Oakland, CA. For information concerning the above mentioned University of California publications contact UC DANR Communications Services (1-800-994-8849) or your local county Cooperative Extension office. 1997 Glenn/Tehema Olives Cost and Return Study UC Cooperative Extension 9

Table 1. SAMPLE COSTS PER ACRE TO ESTABLISH A MANZANILLO OLIVE ORCHARD GLENN & TEHAMA COUNTIES - 1997 Cost Per Acre Year 1st 2nd 3rd Tons Per Acre 0.25 Planting Costs: Land Preparation - Subsoil $150 Land Preparation - Laser Leveling 100 Land Preparation - Disc 3X & Touch-up Leveling 15 Trees: 90 Per Acre @ $4.29 ea., (1% in 2nd year) 386 $4 Survey, Mark, Dig Holes & Plant 158 2 Wrap, Stake & Tie Trees 122 17 TOTAL PLANTING COSTS 931 23 Cultural Costs: Pruning And Suckering 14 28 $28 Brush Disposal 9 11 Fertilizer - Nitrogen 17 19 Weed Control - Mow Centers (3X First 3 Years) 7X 18 18 18 Weed Control - Winter Residual 60 9 Weed Control - In-Season Tree Rows (4X First Year) 41 9 9 Irrigate 23 31 40 Thinning Disease Control - Fall Fungicide 9 12 17 Pickup Truck Use 135 135 135 ATV Use 104 104 104 Leaf Analysis 1 1 1 TOTAL CULTURAL COSTS 345 424 391 Harvest Costs: Hand Pick 56 TOTAL HARVEST COSTS 56 Interest On Operating Capital @ 10.00% 120 27 16 TOTAL OPERATING COSTS/ACRE 1,396 474 463 Cash Overhead Costs: Office Expense 121 121 121 Sanitation Fees 3 3 3 Liability Insurance 13 13 13 Property Taxes 55 55 55 Property Insurance 39 39 39 Investment Repairs 48 48 48 TOTAL CASH OVERHEAD COSTS 279 279 279 TOTAL CASH COSTS/ACRE 1,675 753 742 INCOME/ACRE FROM PRODUCTION 150 NET CASH COSTS/ACRE FOR THE YEAR 1,675 753 592 ACCUMULATED NET CASH COSTS/ACRE 1,675 2,428 3,020 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 10

Table 1. continued. Cost Per Acre Year 1st 2nd 3rd Tons Per Acre 0.25 Non-Cash Overhead Costs (Capital Recovery): Shop Building 124 124 124 Irrigation System 44 44 44 Shop Tools 41 41 41 Ladders - 10 total Land @ $3,429 Acre 283 283 283 Pruning Tools 15 15 15 Equipment 203 217 220 TOTAL NON-CASH OVERHEAD 710 724 727 TOTAL COST/ACRE FOR THE YEAR 2,385 1,477 1,469 INCOME/ACRE FROM PRODUCTION 150 TOTAL NET COST/ACRE FOR THE YEAR 2,385 1,477 1,319 TOTAL ACCUMULATED NET COST/ACRE 2,385 3,862 5,181 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 11

Table 2. COSTS PER ACRE TO PRODUCE MANZANILLO OLIVES GLENN & TEHAMA COUNTIES - 1997 Labor Rate: $9.58/hr. machine labor Interest Rate: 10.00% $6.90/hr. non-machine labor Yield per Acre: 4.0 Ton ==================================================================================================================================== Operation ---------------------- Cash and Labor Costs per Acre ----------------------- Time Labor Fuel,Lube Material Custom/ Total Your Operation (Hrs/A) Cost & Repairs Cost Rent Cost Cost -------------------------------------------------------------- Cultural: Fertilizer - Nitrogen 0.18 2 1 48 4 55 Irrigate 2.00 14 0 70 0 83 Mow Centers - 7X 2.09 24 14 0 0 38 Pruning & Sucker 15.00 103 0 0 0 103 Brush Disposal 0.37 11 2 0 0 13 Weed Control - Spot Spray 0.33 4 2 5 0 11 Thinning Spray 0.25 3 2 96 0 101 Weed Control - Winter Strip Spray 0.25 3 1 7 0 11 Disease Control - Fall Fungicide Spray 0.25 3 2 24 0 29 Pickup Truck Use 4.08 47 24 0 0 71 ATV Use 4.08 47 5 0 0 52 Leaf Analysis 0.00 0 0 0 1 1 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL CULTURAL COSTS 28.89 261 53 249 5 568 -------------------------------------------------------------- Harvest: Pick Fruit 0.00 0 0 0 900 900 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL HARVEST COSTS 0.00 0 0 0 900 900 -------------------------------------------------------------- Interest on operating capital @ 10.00% 31 -------------------------------------------------------------- TOTAL OPERATING COSTS/ACRE 261 53 249 905 1499 -------------------------------------------------------------- CASH OVERHEAD: Office Expense 121 Liability Insurance 13 Sanitation Fees 3 Property Taxes 70 Property Insurance 50 Investment Repairs 48 TOTAL CASH OVERHEAD COSTS 305 -------------------------------------------------------------- TOTAL CASH COSTS/ACRE 1804 -------------------------------------------------------------- 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 12

Table 2. Continued -------------------------------------------------------------- NON-CASH OVERHEAD: Per producing -- Annual Cost -- Investment Acre Capital Recovery ---------- -------- ------------ Buildings 1191 124 124 Shop Tools 354 41 41 Olive Orchard Establishment 3020 252 252 Hand Tools 129 15 15 Ladders - 10 total 39 6 6 Land 3429 283 283 Flood Irrigation System 514 44 44 Equipment 1442 190 190 ---------- ---------- ---------- TOTAL NON-CASH OVERHEAD COSTS 10118 954 954 -------------------------------------------------------------- TOTAL COSTS/ACRE 2758 ==================================================================================================================================== 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 13

Table 3. COSTS AND RETURNS PER ACRE TO PRODUCE OLIVES GLENN & TEHAMA COUNTIES - 1997 Price or Value or Your Quantity/Acre Unit Cost/Unit Cost/Acre Cost GROSS RETURNS Olives 4.00 Ton 600.00 2400 ---------- TOTAL GROSS RETURNS FOR OLIVES 2400 OPERATING COSTS Fertilizer: 46-0-0 135.00 Lb N 0.356 48 Rent: Spreader Rental 1.00 Acre 4.00 4 Irrigation: Water 48.00 AcIn 1.45 70 Herbicide: Roundup Ultra 0.72 Pint 6.88 5 Princep Caliber 90 1.20 Lb 5.45 7 Thinning Agent: Fruit Fix 200 96.00 Oz 1.00 96 Custom: Harvest Olives 4.00 Ton 225.00 900 Leaf Analysis 1.00 Acre 1.00 1 Fungicide: Kocide 8.00 Lb 2.99 24 Labor (machine) 14.27 Hrs 9.58 137 Labor (non-machine) 18.00 Hrs 6.90 124 Fuel - Gas 14.99 Gal 1.30 19 Fuel - Diesel 11.06 Gal 0.97 11 Lube 5 Machinery repair 18 Interest on operating capital @ 10.00% 31 ---------- TOTAL OPERATING COSTS/ACRE 1499 NET RETURNS ABOVE OPERATING COSTS 901 CASH OVERHEAD COSTS: Office Expense 121 Liability Insurance 13 Sanitation Fees 3 Property Taxes 70 Property Insurance 50 Investment Repairs 48 ---------- TOTAL CASH OVERHEAD COSTS/ACRE 305 TOTAL CASH COSTS/ACRE 1804 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 14

Table 3. Continued NON-CASH OVERHEAD COSTS (CAPITAL RECOVERY): Buildings 124 Shop Tools 41 Olive Orchard Establishment 252 Hand Tools 15 Ladders - 10 total 6 Land 283 Flood Irrigation System 44 Equipment 190 ---------- TOTAL NON-CASH OVERHEAD COSTS/ACRE 954 TOTAL COSTS/ACRE 2758 NET RETURNS ABOVE TOTAL COSTS -358 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 15

Table 4. U.C. COOPERATIVE EXTENSION MONTHLY CASH COSTS PER ACRE TO PRODUCE MANZANILLO OLIVES GLENN & TEHAMA COUNTIES - 1997 =================================================================================================================================== Beginning JAN 97 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL Ending DEC 97 97 97 97 97 97 97 97 97 97 97 97 97 ------------------------------------------------------------- Cultural: Fertilizer - Nitrogen 55 55 Irrigate 8 11 14 14 14 14 11 83 Mow Centers - 7X 6 6 6 6 6 6 38 Pruning & Sucker 103 103 Brush Disposal 13 13 Weed Control - Spot Spray 11 11 Thinning Spray 101 101 Weed Control - Winter Strip 11 11 Disease Control - Fall Fungicide 29 29 Pickup Truck Use 6 6 6 6 6 6 6 6 6 6 6 6 71 ATV Use 4 4 4 4 4 4 4 4 4 4 4 4 52 Leaf Analysis 1 1 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL CULTURAL COSTS 10 65 10 24 256 30 30 30 30 32 39 10 568 ------------------------------------------------------------- Harvest: Pick Fruit 900 900 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL HARVEST COSTS 900 900 ------------------------------------------------------------- Interest on oper. capital 0 1 1 1 3 3 4 4 4 12-0 -0 31 ------------------------------------------------------------- TOTAL OPERATING COSTS/ACRE 10 66 11 25 259 33 34 34 34 944 39 10 1499 ------------------------------------------------------------- OVERHEAD: Office Expense 10 10 10 10 10 10 10 10 10 10 10 10 121 Liability Insurance 13 13 Sanitation Fees 0 0 0 0 0 0 0 0 0 0 0 0 3 Property Taxes 35 35 70 Property Insurance 25 25 50 Investment Repairs 4 4 4 4 4 4 4 4 4 4 4 4 48 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL CASH OVERHEAD COSTS 87 14 14 14 14 14 74 14 14 14 14 14 305 ------------------------------------------------------------- TOTAL CASH COSTS/ACRE 98 80 25 40 274 48 108 48 49 958 53 24 1804 =================================================================================================================================== 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 16

Table 5. WHOLE FARM ANNUAL EQUIPMENT, INVESTMENT, AND BUSINESS OVERHEAD COSTS GLENN & TEHAMA COUNTIES - 1997 ANNUAL EQUIPMENT COSTS ========================================================================================= - Cash Overhead - Yrs Salvage Capital Insur- Yr Description Price Life Value Recovery ance Taxes Total ------------------- 97 55 HP 2WD Tractor 32270 12 8068 3919 144 202 4264 97 ATV 4WD 4219 7 1600 639 21 29 689 97 Brush Rake - 10' 1584 25 45 151 6 8 165 97 Front End Loader 4852 15 466 559 19 27 604 97 Mower - Flail 10' 8380 10 1482 1162 35 49 1246 97 Orchard Sprayer - 500 Gal 19741 10 3491 2737 83 116 2936 97 Pickup Truck - 1/2 Ton 18200 7 6904 2758 90 126 2973 97 Weed Sprayer - 100 Gal 3947 10 698 547 17 23 587 ------------------- TOTAL 93193 22754 12472 413 580 13465 ========================================================================================= 60% of New Cost * 55916 13652 7483 248 348 8079 ------------------- * Used to reflect a mix of new and used equipment. ANNUAL INVESTMENT COSTS ============================================================================================================= ------ Cash Overhead ------ Yrs Salvage Capital Insur- Description Price Life Value Recovery ance Taxes Repairs Total --------------------------------------- INVESTMENT Buildings 41672 20 4324 149 208 833 5514 Flood Irrigation System 18000 40 1550 64 90 540 2244 Hand Tools 4505 15 451 518 18 25 50 611 Ladders - 10 total 1371 10 137 197 5 8 0 210 Land 120000 50 120000 9900 856 1200 0 11956 Olive Orchard Establishment 105700 37 8816 377 529 0 9722 Shop Tools 12389 15 1239 1425 49 68 247 1789 --------------------------------------- TOTAL INVESTMENT 303637 121827 26730 1517 2127 1670 32044 ============================================================================================================= 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 17

Table 5. Continued ANNUAL BUSINESS OVERHEAD COSTS =============================================================== Units/ Price/ Total Description Farm Unit Unit Cost --------------------------------------------------------------- Liability Insurance 40.00 Acre 11.73 469 Office Expense 40.00 Acre 106.00 4240 Sanitation Fees 40.00 Acre 3.04 122 =============================================================== Table 6. HOURLY EQUIPMENT COSTS ================================================================================================================== ------------------------- COSTS PER HOUR ----------------------------------- Actual - Cash Overhead - -------- Operating -------- Hours Capital Insur- Fuel & Total Total Yr Description Used Recovery ance Taxes Repairs Lube Oper. Costs/Hr. -------------------------------------------- 97 55 HP 2WD Tractor 143.3 16.41 0.60 0.84 1.37 3.01 4.38 22.24 97 ATV 4WD 143.0 2.68 0.09 0.12 0.31 1.00 1.31 4.20 97 Brush Rake - 10' 13.0 7.00 0.27 0.38 0.20 0.00 0.20 7.85 97 Front End Loader 13.0 25.89 0.88 1.23 0.67 0.00 0.67 28.67 97 Mower - Flail 10' 73.2 9.52 0.29 0.40 1.78 0.00 1.78 11.99 97 Orchard Sprayer - 500 Gal 17.5 93.84 2.84 3.98 2.40 0.00 2.40 103.07 97 Pickup Truck - 1/2 Ton 285.0 5.81 0.19 0.26 1.32 4.48 5.80 12.06 97 Weed Sprayer - 100 Gal 20.4 16.08 0.49 0.68 1.04 0.00 1.04 18.29 ================================================================================================================== 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 18

Table 7. RANGING ANALYSIS GLENN & TEHAMA COUNTIES - 1997 COSTS PER ACRE AT VARYING YIELDS TO PRODUCE OLIVES --------- YIELD (TON/ACRE) 2 3 4 5 6 7 8 --------- OPERATING COSTS/ACRE: Cultural Cost 568 568 568 568 568 568 568 Harvest Cost 450 675 900 1125 1350 1575 1800 Interest on operating capital 28 30 31 33 35 37 39 TOTAL OPERATING COSTS/ACRE 1045 1272 1499 1726 1953 2180 2407 TOTAL OPERATING COSTS/TON 523 424 375 345 325 311 301 CASH OVERHEAD COSTS/ACRE 305 305 305 305 305 305 305 TOTAL CASH COSTS/ACRE 1351 1577 1804 2031 2258 2485 2712 TOTAL CASH COSTS/TON 675 526 451 406 376 355 339 NON-CASH OVERHEAD COSTS/ACRE 954 954 954 954 954 954 954 TOTAL COSTS/ACRE 2305 2531 2758 2985 3212 3439 3666 TOTAL COSTS/TON 1152 844 690 597 535 491 458 --------- NET RETURNS PER ACRE ABOVE OPERATING COSTS FOR OLIVES PRICE YIELD (DOLLARS/TON) (TON/ACRE) Olives 2 3 4 5 6 7 8 350.00-345 -222-99 24 147 270 393 400.00-245 -72 101 274 447 620 793 450.00-145 78 301 524 747 970 1193 500.00-45 228 501 774 1047 1320 1593 550.00 55 378 701 1024 1347 1670 1993 600.00 155 528 901 1274 1647 2020 2393 650.00 255 678 1101 1524 1947 2370 2793 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 19

Table 7. Continued NET RETURNS PER ACRE ABOVE CASH COSTS FOR OLIVES PRICE YIELD (DOLLARS/TON) (TON/ACRE) Olives 2 3 4 5 6 7 8 350.00-651 -527-404 -281-158 -35 88 400.00-551 -377-204 -31 142 315 488 450.00-451 -227-4 219 442 665 888 500.00-351 -77 196 469 742 1015 1288 550.00-251 73 396 719 1042 1365 1688 600.00-151 223 596 969 1342 1715 2088 650.00-51 373 796 1219 1642 2065 2488 NET RETURNS PER ACRE ABOVE TOTAL COSTS FOR OLIVES PRICE YIELD (DOLLARS/TON) (TON/ACRE) Olives 2 3 4 5 6 7 8 350.00-1605 -1481-1358 -1235-1112 -989-866 400.00-1505 -1331-1158 -985-812 -639-466 450.00-1405 -1181-958 -735-512 -289-66 500.00-1305 -1031-758 -485-212 61 334 550.00-1205 -881-558 -235 88 411 734 600.00-1105 -731-358 15 388 761 1134 650.00-1005 -581-158 265 688 1111 1534 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 20

Table 8. COSTS AND RETURNS / BREAKEVEN ANALYSIS GLENN & TEHAMA COUNTIES - 1997 COSTS AND RETURNS - PER ACRE BASIS ========================================================================================================================== 1. Gross 2. Operating 3. Net Returns 4. Cash 5. Net Returns 6. Total 7. Net Returns Returns Costs Above Oper. Costs Above Cash Costs Above Total Crop Costs (1-2) Costs (1-4) Costs (1-6) ---------------------------------------------------- Olives 2400 1499 901 1804 596 2758-358 ========================================================================================================================== COSTS AND RETURNS - TOTAL ACREAGE ========================================================================================================================== 1. Gross 2. Operating 3. Net Returns 4. Cash 5. Net Returns 6. Total 7. Net Returns Returns Costs Above Oper. Costs Above Cash Costs Above Total Crop Costs (1-2) Costs (1-4) Costs (1-6) ---------------------------------------------------- Olives 84000 52474 31526 63150 20850 96540-12540 ========================================================================================================================== BREAKEVEN PRICES PER YIELD UNIT ========================================================================================== -------- Breakeven Price To Cover -------- Base Yield Yield Operating Cash Total CROP (Units/Acre) Units Costs Costs Costs -------------------- ------------ $ per Yield Unit ------------ Olives 4.0 Ton 374.81 451.07 689.57 ========================================================================================== BREAKEVEN YIELDS PER ACRE ========================================================================================== -------- Breakeven Yield To Cover -------- Yield Base Price Operating Cash Total CROP Units ($/Unit) Costs Costs Costs -------------------- ----------- Yield Units / Acre ----------- Olives Ton 600.00 2.5 3.0 4.6 ========================================================================================== 1997 Glenn/Tehema Counties Olive Cost and Return Study UC Cooperative Extension 21